Matthew is a correspondent at Heatmap. Previously he was an economics reporter at Grid, where he covered macroeconomics and energy, and a business reporter at BuzzFeed News, where he covered finance. He has written for The New York Times, the Guardian, Barron's, and New York Magazine. Read MoreRead More
It’s the Doldrums for Wind Turbine Makers
GE and Siemens are having a tough week.
Two of the biggest companies in the wind turbine industry, General Electric and Siemens Energy, both shared disquieting news about their businesses this week. GE disclosed in its third quarter earnings that its offshore wind business had $1 billion in losses so far this year, while Siemens had to respond to reports it was seeking a bailout from the German government. Both GE and Siemens Energy sell turbines, while the latter also services wind farms.
The news adds up to a bleak picture for the wind industry, especially offshore, where developers are having problems keeping existing projects on budget and their suppliers aren’t making money either.
“Next year, we expect offshore will have similar losses, but substantially improved cash performance,” GE’s chief executive Larry Culp said in a call with analysts on Tuesday.
“Offshore will be difficult. That’s what’s behind those underlying numbers for this year and for next,” Culp said. “We know the industry is ready for a reset … We think we can make a much better business with offshore wind, but we’re staring at some challenges that we need to address here in the fourth quarter and in ‘24 for sure.” The company described both higher costs for turbine production as well slowed down deliveries. It also warned that producing its new, larger turbines “remains a key challenge that could result in future losses.”
Across the Atlantic, Siemens Energy was forced Thursday to respond to reports in the German media that it was looking for government support to back up its ailing wind business. The company said that “In light of recent media reports regarding talks with the German government,” its financial results for 2023 would show that its traditional power plant and transmission business was “expected to continue [its] excellent performance,” while the wind business “is working through the quality issues and is addressing offshore ramp up challenges.”
Siemens Energy said that “for the time-being” the wind business is “not concluding new contracts for certain onshore platforms and is applying strict selectivity in the offshore business,” and that revenue is expected to be lower than expected next year as well, while losses will be higher.
Earlier this year, Siemens Energy said that there had been a “substantial increase in failure rates of wind turbine components,” for its onshore business that would incur losses of €1 billion to address, a number that ballooned to €4.5 billion. It also said it was “experience[ing] ramp up challenges in offshore."
In short, the company has turbines that malfunction and contracts that are not profitable, weighing down the entire business.
Shares in the energy company were down more than a third today in Germany.
Reuters and other publications reported earlier Thursday that the company was in talks with the German government about financial support. The company said in its statement that it was “evaluating various measures to strengthen the balance sheet of Siemens Energy and is in preliminary talks with different stakeholders, including banking partners and the German government, to ensure access to an increasing volume of guarantees necessary to facilitate the anticipated strong growth.” One publication, WirtschaftsWoche, put the figure that Siemens Energy was after at €15 billion.
Siemens Energy spun off from its parent Siemens AG in 2020, combining its gas turbines and transmission business into one, along with a two-thirds stake in Siemens Gamesa, the wind business. Earlier this year, Siemens Energy acquired the rest of the wind business. The company’s total market value has fallen by about two-thirds since its stock market debut.